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Figure: Water Works
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators allow the monopolist to charge a price that just covers average total cost, the water works will serve _____ customers.
A) 200
B) 300
C) 375
D) 400

Question

Use the following to answer questions:
Figure: Water Works 
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators allow the monopolist to charge a price that just covers average total cost, the water works will serve _____ customers.
A) 200 
B) 300 
C) 375 
D) 400

Quizplus · Accepted Answer

When a natural monopoly is allowed to charge a price that just covers average total cost, it will produce at the point where the average total cost curve intersects the demand curve. This typically results in serving 375 customers in this scenario.

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